Monday, December 17, 2007

Landlords Have Rights When Tenant Breaks Lease

QUESTION:

I am a real estate investor in the state of Colorado that purchases single family homes for rent. My question concerns my growing frustration over tenants that break their lease. Typically, we only make a lease for one year periods. The issue typically arises when the tenant finds a home and enters into a purchase contract, then sends a notice to me that they intend to break their lease sometimes within 3-4 months of signing the lease! My question actually has more then one part.

  • What can I do to discourage this from happening? (The obvious issues are wear and tear and the expense of finding another tenant).
  • What if I have negotiated terms with the tenant for a reduced rate in lieu of a multi-year lease and the same circumstances arise?
  • Are there legal clauses that can be inserted into the contract lease that we can rely on for compensation? (It seems that collecting money from a tenant who is moving would be difficult to impossible).
  • Are renters able to break a legal contract with impunity?
  • Who would I contact in my state for guidance?

There are probably others, but you get the idea. Any advice would be greatly appreciated.

K. Bryant
Colorado Springs, CO

ANSWER:

You have issues, man! But, fortunately, you’re covered by the law. A good resource for landlords (investors) is http://www.findlaw.com/, (in particular for use: http://realestate.findlaw.com/). Here you’ll be able to get a handle on your rights and responsibilities as a landlord and what tenants are responsible as well.

First of all, tenants (and landlords) need to understand that the lease isn’t just a fly-by-night document. It’s a contract, enforceable by the courts. Yes, you can take their deposit money (but check your state’s Landlord/Tenant Act for particulars.) But as a landlord, you have given up the right of possession of the unit to the renters and they have agreed to pay you for that assignment. FindLaw.com says:

“The lease does not terminate just because the tenant moves out. The lease is a contract in which the tenant promises to pay the landlord for the right to possess the premises whether the tenant actually lives there or not.”

Now, what you want to do with the contract is up to you. If you consider that you’re talking thousands of dollars per year in rental dollars, then it would be worth a visit to the courthouse to force some of your home-buying tenants to pay up on the way out. In the D.C. market, we take that into account when renters want to become buyers and I’ve seen some sellers pay off the lease as part of the sales contract.

Make sure the tenants understand what they’re signing when you put the Deed of Lease under their noses. They may be willing to walk because you cave and say, “Okay…I guess you can go.” Rather than: “Sure, you can get out of it, as soon as you find a sublease or pay up for the remainder of your ‘legally-binding agreement’ called a lease.” There’s no need to get nasty. Simply point it to them when they sign it that it’s legally-binding and that you expect them to fulfill it.

11 comments:

Anonymous said...

Hi Mr. Carr,

I am having a similar problem in DC with my tenant, who happens to be an attorney & is breaking their lease and moving out 6 months into the 1 year lease. Unfortunately DCRA is not that helpful with regards to the landlords side and does not specify what to do with regards to the security deposit.

They've told me to contact an attorney, but Landlord-Tenant attorneys are very expensive here and I just need someone to give me some advice. I've also gone to the Landlord Tenant resource center, but that wasn't too helpful either.

In the meantime, my tenant has used her skills as an attorney to try and intimidate me into getting her way. She claims that holding her security deposit for her breaking the lease is not legal. I would really appreciate if either you or someone you recommend would assist me with this.

dolcevita2@att.net

M. Anthony Carr said...

Welcome to DC investing. You may have to get an attorney's advice to retain the deposit. Tenants rights are very strong in DC. I've seen some properties simply abaondoned because the landlord can't afford to fight for the property. However, I would start with a good attorney to review that individual case and then use a lease that has stood the test of time with getting tenants out when necessary for your future tenants.

pj said...

I've got a different situation here in Colorado- our tenants' lease is up, and they've moved out. However, they're taking their sweet time making repairs that they're bound to do, and we can't rent the home until they're done- we've shown it, but nobody will rent it because it looks awful. They also still have possessions in the home that I've asked them to remove. They're now 5 days(and counting) past their lease. At this point, they have no lease, but we can't get them to finish. They're maintaining that they will finish, but the floor finish didn't come.... they're working on the house at night because they work all day... the shoddy paint repair to the walls was normal wear and tear... they've got all of the excuses, but won't take any of the responsibility for the fact that a very rentable property is sitting vacant due to their lack of motivation. The rent is $2,800/month, and September has 30 days. Assuming all of that, the per diem rate on the home is $93.33 and we have NO idea when the repairs will be completed. Can we take the final per diem day, multiply it by the number of days they're taking to complete the repairs, and take the final figure out of their security deposit?

Anonymous said...

I have a similar situation where there were three adults living in our home and they trashed the house before they moved out. Not to mention, they are refusing to pay for anything. We stay in Texas and our tenants stay in our home in North Carolina. It's frustrating because the security deposit that was paid barely covers anything. I have no idea what to do. Do I need to file a claim in person in NC or can we do it here in Texas?

M. Anthony Carr said...

You're going to have to go through the county where the house is located. As a creditor, you can get a judgement on their credit accounts which will affect their ability to rent elsewhere until they pay off the judgement. Get estimates on the repairs and place that amount as a judgement on their credit reports -- all three of them. Someone's going to reject their application somewhere and they'll have to own up at some point.

John Duff said...

I am Realtor trying to help a young couple buy a home in Colorado. We have the house picked out, and the financing together, but their lease runs until October. The apartment complex said it would cost them $5K to get out of the lease, and they had to pay it within 10 days of giving their notice. They are willing to pay a penalty, and even asked about a payment plan, but were told it had to be paid in full. They can't afford to buy a house if they have to pay that. They have given me permission to negotiate on their behalf, but I wanted to find out as much as i could about their position and rights if any first. What i have read so far isn't encouraging for renters. Can you give me any advice?

zoey said...

i see my house has been spolied by my tenants; the walls and doors. after reading a couple of experiences in this post, I am afraid on how to react. they were saying, after this christmas they will be vacating.

also, a friend of mine has a similar problem. he owns a house equally good as http://www.fivestarhotelalternatives.com/PolePinePoint.php. the lawn around his beautiful property has been spoiled. what would be a fair enough compensation?

Anonymous said...

My grandparents rented a house to a couple who was not married (both signed the lease). The couple has been living there for four months (on a one year lease), and they broke up. Now they are both moving out b.c neither can afford the rent on their own. Do we have rights to payment for the remainder of the lease?

**we live in Pennsylvania**

Anonymous said...

My grandparents rented a house to a couple who was not married (both signed the lease). The couple has been living there for four months (on a one year lease), and they broke up. Now they are both moving out b.c neither can afford the rent on their own. Do we have rights to payment for the remainder of the lease?

**we live in Pennsylvania**

Jackie Carpenter said...

Hello
Will i have a teneat for hell. I had a home that was build in 2006 and complete in 2007 and move a young lady in with nine child and husband .I ask he to keep the home up she sue here pervasive landlord and won with the same thing she sue him will I aske not to mess the home up I give here future and things so my home will not be infected like where she conme form now my home is never pay the bill violate the lease the end 2month ago not paying rent and now I'm been sue

Anonymous said...

I have a similar problem and I'm looking for an advice.

My tenant signed the lease on December 17th. On January 1st he e-mailed me saying he has not moved to the house, lost his job, and will not move. He suggests to return the key and let's forget the whole thing.

Well, I've incurred costs when he signed the contract. I've put all furniture in a storage, said no to other possible tenants, etc...

All his checks were returned by the bank.


I'm already trying to rent the house again - but shouldn't he be liable for the rent in the meantime?

It is a expensive rent ($ 3,000 / month)!